Fed's Bullard expects drop in labor participation

The labor participation rate is expected to fall and the government should not expect an influx of workers, a Federal Reserve official said on Thursday, raising a point that goes against the view of Fed Chair Janet Yellen.

St. Louis Federal Reserve President James Bullard said in prepared remarks for an appearance before a Kentucky business group that an index of aggregate hours worked showed a full recovery to pre-recession levels.

James Bullard, president of the Federal Reserve St. Louis.
Adam Jeffery | CNBC
James Bullard, president of the Federal Reserve St. Louis.

He repeated his view that the Fed may need to raise interest rates sooner than expected.

Bullard's views on the labor market's recovery, and the lack of people ready to join the work force, runs counter to Yellen's view that there is a lot of slack in the job market. Yellen believes there is an influx of workers ready to join when the economy recovers.

Bullard also said the macroeconomic goals of the Federal Open Market Committee are close to being met, and yet its policy settings remain far from normal.

"While this mismatch is not causing macroeconomic problems today ... the mismatch may cause problems in the years ahead as the economy continues to expand," Bullard said.

—By Reuters